Uptop Gats Mbabazi Final Report 191206

7/31/2019 Uptop Gats Mbabazi Final Report 191206

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GATS AND E-COMMERCE

Opportunities and Challenges facing Uganda in Realising the Full

Potential of E-commerce under the GATS

FINAL REPORT


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Kampala- December 2006TABLE OF CONTENTS

TABLE OF CONTENTS......................................................................iEXECUTIVE SUMMARY....................................................................ivLIST OF ACRONYMS.........................................................................vi

CHAPTER ONE................................................................................11.0 INTRODUCTION........................................................................11.1 Background...................................................................................11.2 Research Problem and Justification.............................................21.3 Objectives......................................................................................41.4 Methodology..................................................................................4

CHAPTER TWO...............................................................................7

2.0 OVERVIEW OF THE SERVICES SECTOR................................72.1 A Review of the Ugandan ICT Industry and E- Commerce..........72.2 National Policies Related to Trade in Services.............................82.2.1 National Policy on Services and Export Development7

Strategy......................................................................................82.2.2 Ugandas Services Export Development Strategy ....................82.2.3 The East African Community Development Strategy................92.3 Global Service Trends...................................................................11

2 4 Th U d S i S t 12


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3.11 Developments on the on the International Scene.......................393.11.1 Electronic Bill Payments..........................................................39

3.11.2 Digital Signatures.....................................................................393.11.3 Online Banking.........................................................................403.12 Contribution of E-Commerce to Key Sectors..............................403.12.1 International Trade in Goods...................................................403.12.2 International Delivery of Services............................................413.13 E-Commerce and Services Delivery in Uganda.........................423.14 Creation of an E-Commerce Enabling Environment...................47

CHAPTER FOUR.............................................................................514.0 THE GENERAL AGREEMENT ON TRADE AND SERVICES

(GATS).......................................................................................514.1 Definition of GATS........................................................................514.2 History and Nature of GATS.........................................................514.3 Services Covered y GATS............................................................524.4 GATS Modes of Supply.................................................................53

4.5 Components of the GATS.............................................................554.6 Services Schedule by Specific Commitments under the GATS...574.7 Analysis of Ugandas Schedule of Commitments for the

Development of E-Commerce.......................................................594.7.1 Overview of Ugandas Schedule of Commitments....................594.7.2 Tourism and Travel Related Services........................................604.7.3 Telecommunications Services...................................................614.8 Inadequacies and Limitations of Existing GATS Commitments

(M d 1) 71


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6.5.5 Underdeveloped Services Sector..............................................1016.5.6 Internet Security.........................................................................101

6.5.7 Lack of Skills and Capacity........................................................1026.5.8 Shortage and Unreliability of Electricity ....................................1026.5.9 Legal and Regulatory Framework..............................................1026.5.10 Unemployment.........................................................................1035.5.11 Government Barriers................................................................1036.5.12 Loss of Tax Revenue...............................................................1046.5.13 Financial Intermediaries...........................................................105

6.5.14 Logistics and Transport............................................................1056.5.15 Commercial Barriers................................................................1056.5.16 Social Barriers..........................................................................107

CHAPTER SEVEN ..........................................................................1087.0 NEGOTIATIONS FOR TRADE IN SERVICES............................1087.1 E-Commerce and the WTO Multilateral Trade Negotiations .......1087.2 Accomplishments of the GATS Council .......................................109

7.3 Current Services Negotiations......................................................1107.4 Ugandas Negotiating Position at Hong Kong...............................1117.5 Strategies for GATS Negotiations.................................................113

CHAPTER EIGHT.............................................................................1168.0 CONCLUSIONS AND RECOMMENDATIONS...........................1168.1 Conclusions...................................................................................1168.2 Recommendations........................................................................1168 2 1 B ildi N ti l I f t t 116


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EXECUTIVE SUMMARY

The services sector is one of the fastest growing areas of the Ugandan economyalthough it is still in its infancy. Growth in services trade is enhanced by growth inICT. It is believed that liberalisation of trade in services will promote that growth.Ugandas commitment to the GATS is an effort toward further liberalisation and this

is expected to spur the country on to the path of economic growth. This, however,requires an understanding of opportunities and challenges faced by the country inorder to comply with the GATS and realise the full potential of development. It wasagainst this background that this study was undertaken. The overall objective was toinvestigate the implications of Ugandas commitments to the GATS in the context ofe-commerce. The justification for the research was that Uganda did not have a clearunderstanding of the viability and propriety of trade in services through e-commerceunder GATS. The main research issues included:

The implications or relevance of the current GATS commitments to Uganda. The correlation between GATS and e-commerce.

The potential of e-commerce in Ugandas economic development.

Services that can be traded electronically.

Opportunities and challenges for realising the full potential of e-commerceunder GATS.

The appropriate action plan for Uganda.


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provides highlights of the negotiation process for trade in services. These highlightsprovide a basis for understanding the continuing process of trade negotiations which

are crucial for compliance with the GATS.Chapter Eight provides the conclusion and the recommendations. The studyconcludes that, in spite of the many challenges it faces, Uganda has a lot of potentialto exploit the benefits of e-commerce and successfully comply with the GATS. Thechallenges can be overcome if there is commitment on the part of Government. It isevident that the private sector in Uganda has the potential to play its role if only theGovernment can play its role. It is possible, even under inferior IT conditions, to

conduct profitable e-commerce if the environment is conducive.


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LIST OF ACRONYMS

ADR Alternative Dispute Resolution

AISI African Information Society Innitiative

COMESA Common Market for Eastern and Southern Africa

CTD Committee on Trade and Development

ECS Electronic Clearing System

EDI Electronic Date Interchange

EFT Electronic Funds Transfer

EU European Union

GATS General Agreement on Trade in ServicesGATT General Agreement on Tarrifs & Trade

ICT Information Communications Technology

IDRC International Development Research Centre

IMF International Monetary Fund

ISPs Internet Service Providers


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USEA Uganda Services Exporters Association

UNICTRAL United Nations Commission on International Trade Law

UNCST National Council of Science and Technology

UNCTAD United Nations Conference on Trade and Development

UNDP United Nations Development Programme

UTL Uganda Telecom Linited

UWA Uganda Wild life Authority

VOIP Voice Over Internet Protocal

VSAT Very Small Apeture Terminal

WTO World Trade Organisation


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CHAPTER ONE1.0 INTODUCTION

1.1 Background

Trade in services is currently one of the fastest growing business sectors in the

world. Although services had not captured the attention of global business prior to

the mid-1980s, their importance was becoming increasingly prominent. Trade in

services was part of the issues discussed during the Uruguay Round and agreement

to form the General Agreement of Trade in Services (GATS) was reached in 1994.

The inclusion of services in the Uruguay Round negotiations reflected the growing

recognition among developed and developing countries of the important role played

by the service sector in the global and national economies. This was at a time when

information technology was also growing at an unprecedented rate. At that time, the

internet and e-commerce were not major factors in the services trade and

negotiations but with the phenomenal growth of the internet and e-commerce since

the entry into force of the GATS in 1995, many services are now easily traded

l t i ll th ti t i t t WTO b t lib li


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percentages (33.8) compared to transport (28.4), travel (31.3) and insurance &

finance (6.41) (UPTOP, Final Report on Sectoral and Analytical Studies to GuideUganda in the EPA Negotiations-2005). The growth of the service sector in Uganda

is, therefore, likely to be impacted in a fundamental manner by the growth of ICT and

by e-commerce in particular. Uganda has to take care of this reality in its efforts to

promote trade, particularly trade in services, for the development of its economy.

There was need to investigate the viability and propriety of Ugandas commitment tothe GATS in the context of e-commerce.

It was against this background that this study was undertaken to analyse Ugandas

commitments under GATS and assess the opportunities and challenges it is facing in

order to benefit from the GATS. The findings of the study are presented as a

diagnosis of Ugandas commitments under GATS, a comprehensive survey of e-

commerce opportunities in Uganda and a comprehensive regulatory impact

assessment of e-commerce policy and legislation in particular with regard to the

GATS. The findings of the study are intended to inform policy decisions on the

implementation of Ugandas commitments under GATS and render strategies for


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(ii) The trend towards privatisation has resulted in the dismantling of the large

monopolies and state-owned corporations such as communications, posts, energyand banks, giving rise to a host of new services companies. (iii) The direct

consequence of the changes in the economy over the past few years has caused a

need for increased growth in logistical support services such as telecommunications,

financial services and transport as well as business services such as legal advice

and consulting.

As a result of the highlighted changes, services have become an important link in the

economy. For example, the number of telephone lines in use increased from 7,200 in

1996 to 169,820 in 1999 (2001 Statistical Abstract, Uganda Bureau of Statistics)

while the number of tourists to Uganda increased from 149,817 in 1995 to 197,837 in

1997 (Baseline Survey of the Services Sector in Uganda, May June 2002, Uganda

Services Exporters Association, 2002). Given the growing importance of the services

sector, Uganda made commitments to the GATS as one way of strategically

positioning itself to benefit from the global developments. Up to this time, however,

Uganda did not have a clear understanding of the viability and propriety of its

it t i th t t f Th l f U d t


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use to attract foreign investment, know-how as well as technology transfer. On the

other hand, foreign investors from developed countries regard GATS as a tool whichallows them to extend their operations by investing in Uganda and GATS provides a

framework for the stable and predictable development of this trend in services. It was

against this background that this study was undertaken.

1.3 Objectives

The overall objective of the study was to investigate the implications of Ugandas

commitments under GATS to the development and optimal utilisation of ICT and e-

commerce. The specific objective was to undertake a comprehensive study of

opportunities and challenges facing Uganda in realising the full potential of e-

commerce in the context of services liberalisation under GATS.

The highlighted objectives were achieved by carrying out a number of activities.

Primary and secondary data was collected and analysed to evaluate Ugandas

current commitments to the GATS. A survey of the Ugandan service sector was

carried out and a due-diligence / legal audit of the service industry legal framework


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and the nature and accessibility of e-services; GATS and Ugandas obligations under

the GATS; policy framework for e-commerce as well as legal and institutionalframework. The focus of the study was on assessing the viability of e-commerce

under GATS and this was done through addressing various issues related to the

overall study subject.

The main sources of information were the internet and other publications; the media;

Ministries of Tourism, Trade & Industry; Ministry of ICT; Ministry of Works &

Transport; Ministry of Foreign Affairs; Uganda Bureau of Statistics; Uganda

Communications Commission; Internet service providers; private exporters &

importers involved in on-line businesses; financial institutions and tour company

operators.

In order to critically analyse the challenges and opportunities presented by GATS to

effective regulation and development of e-commerce, a comprehensive tool kit that

constituted the methodology was developed. The Tool kit was constituted by a set of

guiding questions (see Appendix 2) aimed at getting information on the critical issues

th t th t d h d t dd Th GATS i l b f i ht bli ti


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Analyse and assess the services industry in the context of services

liberalisation under the GATS discipline: Analyse and assess the synergies between the service industry and the ICT

sector

To assess Ugandas e-commerce readiness, accessibility and nature of e-

services.

To impart knowledge to the public and create awareness of the GATSdiscipline and service liberalisation

To analyse and assess the legal and regulatory framework of the services

industry

To analyse and assess the regulatory framework governing the ICT sector in

Uganda and the manner in which it has continued to develop;

Assessment of the ICT sector in Uganda and its capacity and readiness to

optimally utilise e-commerce;

Assessment of stakeholder institutions; and

Assessment of enforcement of the different obligations.


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CHAPTER TWO

OVERVIEW OF THE SERVICES SECTOR

2.1 A Review of one Example of the Constituents of the Services Sector - the

Ugandan ICT Industry and E-Commerce

Although the ICT industry in Uganda is still in its infancy, it is experiencing a

relatively high growth rate because of its increasing significance to the growth and

development of the economy, particularly the service industry. The Government of

Uganda has formulated and adopted the National ICT policy symbolising Ugandas

commitment to the continued growth and development of a viable ICT industry. A

new ministry has been established to oversee the development of ICT. There are

also initiatives under an agreement with the USAID to develop an ICT

roadmap/national ICT master plan to support e-government and e-business in

Uganda as an immediate goal, to be followed by e-education and e-health.

The Government has also set up the National Information Technology Authority


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2.2 National Policies Related to Trade in Services

2.2.1 National Policy on Services and Export Development Strategy

The government of Uganda does not have a comprehensive national services policy

covering all the services sectors. The Government has only put in place sector

policies, legal framework, regulations and strategies for regulating, harnessing and

promoting the potential of the services industry. It has individual policies and

regulations for individual sectors (Werth, et al 2006).

In the area of tourism there has been the Uganda Integrated Tourism Master Plan

(ITPM) developed for the period 19992-2002. A sequel to this is the National

Tourism Policy, which directs actions to ensure that tourism development is socially,

culturally and environmentally acceptable and a vehicle for poverty alleviation. In the

area of ICT, there is a National ICT Policy propped up by other developmental

initiatives in the sector undertaken by different ministries, other government offices

(Ministry of ICT, Uganda Communications Commission, UIA and the Uganda ICT

Outsourcing Services Association. Also, the Ministry of Gender, Labour and Social


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operationalisation of the Poverty Eradication Action Plan (PEAP), the Medium Term

Competitive Strategy (MTCS). It targets five (5) priority sub-sectors derived from the2002 baseline survey namely higher education, migrant labour, health service

expertise and management of communicable diseases, niche tourism and

information communication technologies (ICT). Some of its key specific objectives

are to:

Increase the visibility and profile of Ugandas service industry in the exportsector

Establish reliable databases of service exporters of Uganda including

Ugandans in the diaspora.

Advocate for pro-active policies that will encourage the growth of the sector

for exports Strengthen market research and dissemination on market opportunities in the

Service sector

Advocate for pro-active policies that will encourage the growth of the sector

for exports

S h k h d di i i k i i i h


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Treaty for the establishment of the East African Community has placed emphasis on

co-operation in services.

Articles 89 to 101 of the Treaty identify the areas of co-operation in infrastructure and

services to include transport (e.g. road, rail, maritime and air transport) and

communication (e.g. postal services and Telecommunication); energy; and other

transport supportive services. Other areas of co-operation comprise education and

training (Article 102); tourism (Article 115); financial services (Articles 85 & 86) and

health (Article 118). Partner States are still at the initial stages of developing the

necessary regulatory framework for their services. These shall continue to be

developed in context of reforms. (EAC development strategy 2005)

As stated in the East African Community Development Strategy of 2005, the EAC

members will take the following steps to promote trade in services:

Select services where competitiveness could be built up at the Community level

and undertake liberalization programmes at the regional level prior to possible

liberalization at multilateral level. Partner States in undertaking liberalization at


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of supply of services, namely cross-border trade, movement of natural persons,

establishment of commercial presence and consumption abroad.

2.3 Global Services Trends

There has been significant growth in services (such as financial services, transport

and shipping services) and many other business services (such as consulting, legal

advice, surveillance, etc.) in recent decades as a direct consequence of the rapid

economic growth and dynamic trade expansion. In the wake of these changes, the

services sector has today become a key link in the strengthening and development

of countries economies. Services are not only important in their own right but also

because they are an input into the effective trade of all commodities. Quality

education and social services such as health, finance, logistics, marketing and

telecommunications services make agricultural and manufacturing producers as well

as service firms more productive and competitive internationally.

Global exports of commercial services and their respective share to total exports

increased tremendously between 1980 and 2001. Over this period, the growth of


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global trade in services which reflects the fact that demand for services tends to be

income elastic: as people become wealthier they spend relatively more on services

mostly tourism, education and health (Riddle, 1986).

While the bulk of this trade accrues to developed countries, developing countries

have been consistently consolidating themselves as services exporters. In the last

decade, exports of services from the developing countries increased by USD 200

billion from USD 147 billion in 1990 to USD 347 billion by 1999. Export of services

comprised the top five sources of foreign exchange for 90 developing countries

worldwide and by 2003 developing countries accounted for 67 percent of services

export markets worldwide (International Trade Centre, et al. 2004).

According to UEPB 2005, trade in services for developing countries covers over 40%

of their total exports. In the next 5 years, this is expected to rise to 70% (ITC, 2005).

There has been tremendous growth in transport services both in value and volume

for increased merchandise trade. Tourism stagnated in developed economies and

increased significantly in developing economies such as East Asia in 2003. The


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and made some tourist attractions inaccessible. A Ministry of Tourism, Trade and

Industry report of 20031 indicates that the country received a total of at least US$

265.35 million as tourist expenditure excluding all expenditures made abroad. The

report reveals that tourism contributed about 4.0% to the countrys GDP and 29.1%

to foreign exchange earnings (excluding all donor financing and remittances of

externalized manpower).

While the sector remains highly dependent on international visitor arrivals with very

limited growth in domestic tourism, it continues to benefit from the governments

recognition and promotion. In 2000, for instance, the tourism industrys share of total

planned investment in Uganda was 30 percent. Investments in tourism have been

directed to expanding capacity to meet the growing tourist influx. Between 1998 and

2000, the sector had 26 investment projects. These included hotels, lodges, tented

camps, service apartments, tour operators, casinos, cinemas, restaurants, and white

water rafting companies with total planned investment of more than US$ 460 million.

Categorising the tourism and travel services sub-sector in Uganda according to the


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ensure that tourism development is socially, culturally and environmentally

acceptable. As a vehicle for poverty alleviation it aims to ensure that tourism

becomes a vehicle for poverty reduction in the future to the extent possible within the

resource base and market limitations.

Education

Education is one of the key service sub-sectors in Uganda and the government

attaches great importance to the improvement of education services.

Education plays a vital role in promoting sustainable development through

improving the populations various skills as well as raising awareness on

various issues of national importance including improving general standards

of living. The Ugandan education system follows a 7-4-2-3 pattern: seven

years of primary education, followed by four years of lower secondary or

Ordinary level, two years of upper secondary or Advanced level, and a

further three to five years of tertiary education.

The introduction of Universal Primary Education (UPE) has caused primary


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good standard of health for all people living in Uganda in order to promote a healthy

and productive life.

In the 1960s and early 1970s Uganda had one of the best health systems in Sub-

Saharan Africa. Makerere University Medical School was one of the outstanding

medical schools in the world producing hundreds of Doctors a year. However

political instability in the country, and massive drain brain and export of trained

medical personnel to foreign countries with better remuneration and working

conditions negatively affected the delivery of health care services in Uganda. Since

1996, the Government has made substantial achievements in strengthening the

health service sector. In 2000, the Health Sector Strategic Plan (HSSP 1) for the

period 2000/1-2004/5 was developed and launched in the framework of the Vision

2025, the Poverty Eradication Action Plan and the National Health Policy. The Health

Sector Strategic Plan (HSSP 2) for the period 2005/6-2009/10 has been developed

by the sector stakeholders to guide sector programmes and activities for the next 5-

year medium term (UEPB 2006). Today Uganda has a number of world-class health

service centers of excellence, which are involved in various research studies at

national and international levels. These include the Joint Clinical Research Centre


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telecommunications liberalization efforts and subsequent licensing of two national

operators and mobile network service providers has contributed to the 2,142%

growth from 1986 to 2004. Most of the increase has taken place during the past five

years.

Overview of Ugandas Services by Mode

According to the General Agreement on Trade in Services (GATS) of the WTO, trade

in services falls under four Modes of supply: cross border trade, consumption

abroad, commercial presence and movement of natural persons.

An analysis of Ugandas services trade shows that cross-border supply of services is

the least developed and utilised mode of trade, considering that the Mode requires

use of advanced technology as part of its delivery mechanism (Werth, et al, 2006).

Owing to the ICT challenges the country faces, this Mode has only been marginally

utilised, largely in the financial services. From the data available, Uganda is a net

importer under this supply Mode. Service inflows in Uganda are broadly from

transportation sector and grew at an annual rate of 18 percent for the period 1993 to


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continued to exceed the inflows and the gap between the two was growing wider

given that the outflows continued growing at a much faster rate than the inflows. This

trend is explained by Ugandas landlockedness which means that for international

access it has to continue spending lots of money on road, air and rail service imports

which constitute the largest portion of service imports under Mode 1. In addition, by

not having an airline of its own, Uganda continues to import substantial air transport

services from other countries, especially the COMESA, EAC and the EU.

In the Mode 2 category (consumption abroad), tourism and travel is the best

example for Uganda of services exports. While Uganda is a net importer of services,

tourism and travel has recorded the biggest recorded source of service inflows for

the country contributing over 60% over the period 1999-2004. This implies that there

should be more efforts aimed at developing the sub-sector further by capitalising on

the positive attributes that tourism in Uganda offers.

Services under the Mode 3 (commercial presence) category have not played any

significant role in the economy. Most Ugandan companies have not been able to


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largest contributor to growth over the 1990/91-2003/04 period accounting for 3% of

the 6.2% GDP growth during that period. They surpassed agriculture as the

dominant productive sector in the economy (Table 1). Much of the growth in the

services sector has been directed to domestic demand rather than exports.

Table 1: Sector Contributions to Economic Growth for Uganda

Sector Shares of GDP (in %) Contribution to Growth Averagegrowthperannum1990/91 2003/04

Average1990/91-2003/04

1990/91-2000/01

2000/01-2003/04

1990/91-2003/04

Agriculture 52.8% 38.5% 44.5% 1.7% 1.5% 1.6% 3.7%

Industry 12.7% 19.4% 16.8% 1.7% 1.3% 1.6% 9.7%

Construction 5.9% 8.1% 7.0% 0.6% 0.8% 0.6% 8.7%

Gas, electricity, water 0.9% 1.4% 1.2% 0.1% 0.1% 0.1% 10.4%

Mining and quarrying 0.3% 0.7% 0.6% 0.1% 0.0% 0.1% 13.5%

Manufacturing 5.6% 9.2% 8.1% 0.9% 0.4% 0.8% 10.4%Services, etc 34.6% 42.0% 38.7% 3.0% 2.8% 3.0% 7.8%

Total GDP 6.4% 5.7% 6.2% 6.2%

Source: Adapted from World Bank calculations based on Uganda Bureau of Statistics.

The services sector accounts for over 70% of formal employment contributing greatly


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Table 2: Uganda Services Account (USD Millions) 1999 2004

Source of inflow 1999/00 2000/01 2001/02 2002/03 2003/04

Tourism and Travel 156.48 165.8 168.96 171.98 200.84Transportation 29.28 33.71 36.14 38.67 47.1Communication 9.14 10.16 9.69 13.38 17.01Construction 0 0 0 0 0Insurance 0 0.93 1.76 0.82 1.34Financial 0 0 0 7.71 22.83Computer & Information 0 0 0 2.88 5.69

Royalties and License 0 0 0 1.38 5.87Other Business Services 0 0 0 12.53 19.16Personal, Cultural & Recreational 0 0 0 0 0Government 8.45 8.45 8.45 9.04 11.51Total Inflows (Credit) 203.34 219.04 225.53 258.39 331.35

Services Net -241.01 -229.54 -316.13 -268.03 -226.67

Source: Adapted from Bank of Uganda

2.7 The Ugandan ICT Industry and E-Commerce

The ICT industry in Uganda is still in its infancy, although it is experiencing a

relatively high growth rate in the COMESA region. The ICT sector is increasingly

becoming critical to the Ugandan economy. Uganda has gone a long way in

liberalizing telecommunications services and telecommunications is part of the


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There is, therefore, an enormous potential to engage in e-commerce and ultimately

expand the services trade in Uganda. The effective development of the ICT sector

will spur growth, efficiency and productivity in the service industry throughout the

country. Nonetheless, the existing policies and regulatory framework are not

considered adequate enough for continued growth of both the service industry and

the ICT sector to propel and transform Uganda into a knowledge-based economy

capable of competing in the global information economy. This was, therefore, the

reason for undertaking a comprehensive study of the opportunities and challenges

facing Uganda in realising the full potential of e-commerce in the context of services

liberalisation under GATS.

Ugandas Services Export Potential

Global service markets are growing and they offer opportunities in business

outsourcing, professional and tourism services. This is due to technological

innovation such as faster, cheaper telecommunications and lower-cost travel, which

makes it easier to market and to reach new customers.


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Uganda could easily be packaged and exported as a Model for HIV/AIDS and

communicable disease-prone and -plagued countries. Ugandas private ICT sub-

sector has made attempts to join the global ICT outsourcing services industry.

Despite limited support from the Government it is reported that Ugandas ICT exports

reached an all time high of US$ 43 million during the fiscal year 2004/5 and several

non-exporting companies are recorded as having a good potential to export ICT-

based services in the next 5 to 10 years. The massive potential in these and other

service sectors could be harnessed and developed for the export market.

These highlights indicate that Uganda has real potential for developing services

export. In order to realise the potential, a number of strategic initiatives need to be

undertaken but care must be exercised to have the priorities right. One of the key

priorities is the development of the physical infrastructure. There is need for

deliberate effort by Government to take the lead in supporting the establishment of

infrastructure particularly in the area of ICT. The Private sector may not take the lead

because private investors are primarily driven by profit and often would be unwilling

to wait if the profit comes in the long term. Investing in the ICT infrastructure should


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CHAPTER THREE

3.0 ELECTRONIC COMMERCE (E-COMMERCE)

3.1 Definition of E-Commerce

The working definition of e-commerce in WTO is the production, distribution,

marketing, sale or delivery of goods by electronic means (WTO,

WT/COM/MID/W/38, March 1998). It can also be looked at as a means of enabling

and supporting the exchange of information, goods and services between companies

and their customers electronically; or commerce that is free of any paper-based

documents and where computer, telecommunication and internet technologies are

used to transact goods, advertise their products and offer services to a global market

(Kiggundu, 2002). These definitions show that e-commerce may be interpreted more

broadly than just trade via computer networks to include trade conducted over

telephones or fax. E-commerce is, however, more prominently seen in internet and


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In terms of the multilateral trading system approach, e-commerce issues were

conceived as a substance generated by an interface with existing WTO agreements

such as GATT, GATS and TRIPs. At the second session of the Ministerial

Conference held in May 1998 in Geneva, Ministers adopted the Declaration on

Global Electronic Commerce4 directing the General Council to establish a

comprehensive work programme to Council for Trade in Services and examine all

trade-related issues relevant to global electronic commerce. It was assigned the

oversight to ensure that all relevant elements and cross-cutting issues are examined

from a broad perspective and that any conflicts of jurisdiction are resolved. 5 The

WTO was requested to examine the treatment of e-commerce in the context of the

GATS legal framework, including the issues of the scope and Modes of supply

(Art.I), MFN (Art. II), transparency (Art. III), developing countries' participation (Art.

IV), domestic regulation standards, and recognition (Art.VI and VII), competition (Art.

VIII, IX), protection of privacy (Art. XIV), market access commitments (Art. XVI),

national treatment (Art. XVII), as well as customs duties and classification issues.

The Council for Trade in Goods was directed to examine the issues relating to


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The abrupt termination of the World Trade Organization ministerial conference in

Seattle left in limbo several electronic commerce initiatives, including the continued

duty-free treatment of e-commerce transactions and a package of further tariff

reductions on hundreds of information technology items6. At the Fourth Ministerial

Conference in Doha in 2001, ministers agreed to continue the work programme as

well as to extend the moratorium on customs duties. They instructed the General

Council,7 to report on further progress to the Fifth Ministerial in Cancn, in 2003.8

After the Doha Ministerial Declaration, the General Council agreed to hold

dedicated discussions on cross-cutting issues, i.e. issues whose potential

relevance may cut across different agreements of the multilateral system. The

issues discussed included: classification of the content of certain electronic

transmissions; development-related issues; fiscal implications of e-commerce;

relationship (and possible substitution effects) between e-commerce and traditional

forms of commerce; imposition of customs duties on electronic transmissions;

competition; jurisdiction and applicable law/other legal issues. The examination of

these issues is still unfinished.9


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organisations, conducted over computer-mediated networks. The goods and

services are ordered over those networks, but the payment and the ultimate delivery

of the good or service may be conducted on or off-line.12 It is comprised of

computer services when a customer sits down at a computer or other access device

and logs

onto internet; advertising services

when the website contains promotional information; distribution services when one

orders for a product and financial services when that product is paid for using the

internet.

Whatever definition is adopted it should always be remembered that e-commerce

involves cross cutting issues as to whether it involves goods or services. The

discussion continues to revolve around whether e-commerce should be considered

as trade in goods or in services, or a combination of the two.13

By defining it as trade in goods, the WTO applies the rules under the General

Agreement on Tariffs and Trade, which automatically lowers all tariffs and barriers to

trade to zero. If e-commerce is defined as trade in services, then the rules of the


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covered under the TRIPS agreement binding for all WTO Members 15. Ecommerce

cuts across a number of WTO agreements the GATT, GATS and TRIPS

In the trade in services, unlike trade in goods, there are no tariffs or fiscal duties

applicable when service products or suppliers enter the territory of another country.

Protection to a domestic service industry is given through domestic regulations. A

country wishing to liberalize has, therefore, to decide which measures to keep in

place and which to modify or remove to bring them in conformity with GATS rules.

The measures on which such decisions have to be made are those affecting the

entry of a service producer or service supplier into its market, and those affecting the

post-establishment activity of service suppliers. Most aspects of e-commerce are

cross- cutting among other WTO Agreements, but GATS covers the major part of it.

This is the reason it is addressed under GATS in this study.

3.3 Benefits of E-commerceThe importance e-commerce plays in Modern business cannot be underestimated. It

is further reflected in the benefits it offers and these include the following:

It saves time in that a buyer need not run all over the town or from country to


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to purchase or sale their goods. Some of the disadvantages associated with e-

commerce include the following:

It is associated with fraud risks and these are increasing

The use of e-commerce increases specific costs, such as shipping and handling

costs (for those dealing in merchandise)

It does not allow the buyer to see or touch the merchandise before buying since

the transactions are done on-line. It is hard to return unwanted goods.

One operating on-line misses business opportunities of those who are not on

line.

3.5 Importance of the ICT Sector and E-commerceThe ICT sector is crucial in the development of a vibrant services export economy

since it plays a backbone for the development of e-commerce and a key role in the

delivery of services using the ICT infrastructure as a platform. E-Commerce is

becoming an essential part of modern economic and business transactions. In


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modems), and scientific instruments. Uganda is not an ITA participant but can at

least benefit from the tariff cuts since the Agreement is undertaken on an MFN basis.

Telecommunications services (basic and value added) and computer services (such

as online information or database retrieval) which in Uganda is part of the ICT sub-

sector provide the infrastructure for the internet and intranets through which e-

commerce is conducted and are themselves a significant and rising share of cross-

border trade in services.17 The GATS is the WTO instrument governing trade in

telecommunications services and computer and related services. In the WTOs work

Programme on e-commerce, an issue was raised as to whether internet access

services should be classified as basic or value-added telecommunications services.

The distinction is important because it determines how internet access services are

affected by the Reference paper and the Annex on Telecommunications. The

Reference Paper applies to internet access services or other internet related

services only if they are basic telecommunications services. If internet access

services are classified as basic telecommunications services, a member who has

adopted the reference paper would have to maintain appropriate measures to ensure

that internet access providers do not act in an anti-competitive manner. Members


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multinational buyers and sellers eventually insist that their trading partners operate

via an internet business-to-business portal. This has already started happening as

revealed through an interview with Cayman, a data processing company based in

Uganda, which experienced difficulties with its partner company in Canada over the

use of Voice Over Internet Protocol (VOIP) because there was no law in Uganda to

allow its use, and there was monopoly over VOIP by UTL and MTN.

3.6 State of the Sectors Development in Uganda

The ICT industry in Uganda is still in its infancy, although it is experiencing a

relatively high growth rate within in the COMESA region. There are about 36 medium

to large-scale investment projects proposed in the ICT sector licensed to a tune of

US $16.5 million, with potential to create about 1,027 skilled jobs for Ugandans.

Ugandas laudable telecommunications liberalization efforts and subsequent

licensing of two national operators and mobile network service providers has

contributed to the 2142% growth from 1986. Most of the increase has taken place


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Business-to-Business (B2B)

This refers to transactions between business conducted electronically over the

various forms of internet and private networks18. Transactions take place between

businesses and the respective supply chain members. This includes on-line-

wholesaling in which businesses sell goods and services to other business on the

web (e.g. when a bank orders stationery from a stationery supplies). This facilitates

the transactions in that it eases the communication processes such as invoicing,

tracking of the order and payment. All these can be performed on line between the 2

parties. This process, however, may become complex if the transactions are of an

international nature and they involve a number of container loads or ship loads. This

will involve greater risks that require more parties to be involved (such as customs

departments, verification bodies and financial institutions). However, where the

parties involved have already developed mutual trust with third parties, B2B internet

portals can reduce the number of parties involved.

In 2005, the global B2B market was estimated to be US$7-US$10 trillion. Currently


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In Uganda, this form of ecommerce is nearly not exploited at all because the national

local market for physical goods and services is much more restricted and confined

essentially to Kampala and other urban centres. Therefore, strategies to exploit this

potential of business could provide a big opportunity for Uganda to develop

ecommerce.

Business-to-Government (B2G)

Here businesses create electronic storefronts that offer information, goods and

services to government. This has not effectively been embraced in Uganda and is

still in its infancy in most countries. It involves an electronic form of interaction

between government and the business or the community. Examples of B2G e-

commerce transactions that can be conducted on-line include the submission of tax

declarations on-line, paying tax, making application for and paying for licences,

passports, or even voting on line. Government-owned institutions such as Customs

Office can provide electronic means of paying customs costs and clearing of goods.

Uganda has installed the UNCTAD ASYCUDA Customs Management S which is

designed to allow businesses and agents to submit Customs declarations


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transacted on-line is expected to increase. For clarity it is important to note that e-

commerce transactions and instruments include the following:

Subscription for online and Internet access.

Subscription to information services / software sales

Consumers retail sales e.g. computer equipment (Internet based shopping

mall) travel services / airline tickets audio /video recordings, books on-line,

auctions. Business-to-business wholesale and retail services and sales

Advertising and marketing services

Financial services and transactions e.g. EFT, ATM/credit cards, online

brokerage, direct investment and stock trading and online banking and bill

payment. Government services and information systems for automatic access to

website, filing documents, obtaining application, licence application and

permits, taxes (payment) and participating in the political process.

Other/Ancillary function contributing to business/commercial activities


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(a) Step 1: Simple Messaging

A mobile phone has a service called the short messaging services (sms). One can

send an sms to ones middleman, customers or even relatives either informing them

that ones produce is ready for collection, thanking them for being loyal to you or

informing them of new happenings within your business at very low cost. This is of

greatest immediate potential because;

it is cheap to use,

covers a wide range of potential customers in one go

Gives a personal touch to your client.


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Services can be accessed by the entrepreneur while away from ones work

station.

(c) Step 3: Web Publishing

In its simplest form this consists of a 3-4 page website giving a basic company

profile, some information about products and services, and contact information

physical and postal address, telephone and fax, and e-mail contact. In a more

advanced form it may include an online catalogue an online version of a

conventional catalogue that can be easily updated.

(d) Step 4: Web Interacting

Web interaction will allow customers more scope to browse through images,

descriptions and specifications relating to your products and services. It may allow

them to submit e-mail enquiry forms, to order online, to use online services or to use

a shopping cart facility and order confirmation that can be paid for and fulfilled offline.

Web interaction can facilitate more effective customer service and to answer

customer queries. It will also be possible to use the Internet to research information.


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Each of the above steps to e-commerce can be owned and controlled directly by the

enterprise or can be accessed via an intermediary through the following ways;

The enterprise owns, develops and uses an e-Commerce application.

The enterprise owns and uses e-Commerce applications, but lets others

develop them.

The enterprise uses e-commerce applications only, but lets others own and

develop them.

From the definition, one ought to have the following in order to engage in e-

commerce and transact electronically:

i) Wire network

This can be of co-axial wires, optic fibre or cable.

ii) Wireless network

This can be satellite or cellular.

On these networks one can operate internet. Internet has resulted in conveyance of


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3.9.1 Physical Products

When trading in goods using e-commerce, a business eventually reverts to physical

order processing. One of the benefits of e-commerce is that it speeds up the

communication and sales cycle leaving the buyer with the impression that delivery of

the goods will also be faster. If the backrooms order processing has not been

designed to deal with the new business model, problems will arise and the buyer will

feel nothing has been gained by buying online. A logistics problem has arisen in B2C

and B2B e-commerce where orders are more regular, orders are smaller, and the

numbers of customers is growing, and are more widely located around the world.

Logistics services providers are still grappling to deal with the new demands of e-

tailing (the equivalent of retailing). For international orders, the delivery process can

become complicated with customs requirements at both ends.

Virtual Products

Trading in virtual products is well suited to e-commerce business. Here the

transaction is completed online; from enquiry, order, payments and delivery all can


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in the world, provided they have Internet connectivity. Once the work is completed

the person sends it back to the company by email. Such services are known as

offline, since the work is done offline. Only when the work is completed does the

person go online to send it back to the customer.

b) On-line teleservices

On-line teleservices can be divided into interactive and non-interactive services.

Interactive on-line services involve real time involvement by the contracted party.

Examples of these types of services include call centres handling, airline

reservations, telemarketing and after-sales support. Low-cost Internet telephony now

allows corporations based in developed countries to outsource call centre work to

low labour-cost countries, provided the call centre, for example, situated in Uganda,

has reliable high bandwidth connections. Online non-interactive services would

include Internet radio stations, or Internet sports sites, which provide downloadable

but recent news on sports events.

3.10 Developments in E-Commerce and Related Activities in Uganda


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investing in the specified areas to apply to the UCC thereby ending the monopoly of

the existing national operators (MTN and UTL) in the specified areas.

Before the telecommunications sector in Uganda was liberalised in 1998, few

enterprises and organisations had access to local Internet Service Providers (ISPs).

After the sector was liberalised, private companies were allowed to establish ISPs.

Following that liberalisation, 3 companies were allowed to register, namely MTN,

CELTEL and UTL.

The liberalisation of the telecommunications sector has led to substantial growth in

the growth of internet and telephone networks. Internet subscribers in Uganda are

estimated at 1.5 million currently (The New Vision, May 26, 2006). The number of

service providers has grown from 1 fixed operator, 1 mobile operator and 2 ISPs in

1996 to 2 fixed operators, 3 mobile operators and 17 ISPs in 2006. Telephone

penetration has grown from a mere 0.26 lines per 100 persons in 1998 to 6.5 lines

per 100 persons in 2006. Of this, the biggest growth has been witnessed in the

mobile cellular telephones. In terms of coverage, telecommunication services are


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These developments have created more employment opportunities for the

population either directly with the service provider, or in other activities related to the

industry such as operation of phone kiosks, internet cafes or provision of various

services to the major telecom, postal and courier companies. Over 5,000 people are

directly employed in the telecommunications companies while about 130,000 people

are indirectly employed in the sector.

Other developments that have taken place in Uganda include projects intended to

improve connectivity for Uganda. These include the underground optic fibre that has

been installed in some parts of Kampala and may be extended to other major town

centres. There are also a growing number of pay phones that have been established

in almost all towns of Uganda and others in village trading centres. These have

helped to provide telephone access to rural populations in a manner that was

unknown prior to the liberalisation of telecommunications in Uganda.

While the telecommunications sector has made substantial growth, internet access is


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Electronic bill (EBP) pay is essentially paying your household bills over the internet.

In most cases, it works like this. The consumer subscribes to an EBP provider,

deposits funds (or you allow them access to your bank account) with them and as

the consumer receives their bills in the mail, they in turn email them to their EBP

provider with the date that they want the invoices paid.

Digital Signatures

These are the latest from the e-commerce world. The system allows consumers to

sign legal documents in different places without being physically there. Prospective

buyers are allowed to sign binding contracts without their physical presence. In the

developed world these are legally binding and they hold the same weight in court as

the signatory were actually present in person.

Digital signatures are the latest from the e-commerce world. This allows consumers

to sign legal documents across the country without being physically there. This

latest trend has really taken off in the housing market. Allowing prospective buyers


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Residents of Uganda may order for goods on line and, upon payment, the goods are

delivered at a warehouse or collecting centre. In order to streamline the payment

system, the traders may operate a credit card system affiliated to banks abroad. The

resident traders open up foreign bank accounts which issue credit cards to the

account holders. The account holders transfer money by TT to their foreign bank

accounts to keep their accounts in credit. The residents use their credit cards to

effect payment on line for commodities purchased or services consumed.

International Delivery of Services

Residents can purchase or sell services on line. Examples of services that can be

sold or purchased on line include telecommunication, education, health, information,

insurance and news services. The system works as follows:

a) Telecommunication

This uses the services of other operators and providers of telecommunication

services. The service providers and operators can have voice and data gateways for

the provision of internet, server hosting and VOIP services. It would also require


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student can do examinations and send back to the foreign tutor online. The marking

can be done and the student receives the marks back on line, one can thus receive a

certificate without ever having to travel abroad or without the tutor ever coming to

Uganda.

d) Financial Services

Ugandans can open and operate bank accounts without having to physically go to

their bankers. A customer can receive bank statement transfer money or make

deposits to the account on line.

e) News and information services

Ugandans can receive news and information on line through subscription to news

and information service providers. This would particularly be helpful in serving

remote areas where news papers cannot reach or where the news papers are too

expensive for the residents


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Ecommerce in services or electronically enabled services trade can be defied as the

use of the internet and other electronic means in the purchase, delivery, supply and

consumption of Services trade internationally. For purposes of electronic commerce,

we can think of service sectors as falling into at least four non overlapping

categories:

(i) The service sectors which help in the development of the infrastructure for

electronic commerce, notably telecommunications and computer and

computer related services;

(ii) The service sectors where the services can actually be delivered

electronically, which include for example business, entertainment and

financial services;

(iii) The service sectors which are complementary to all commerce, including

electronic commerce such as postal, courier and transport services;

(iv) The service sectors which would benefit from electronic flows more

generally, i.e., through lower search costs, faster data transmission,

electronic processing of administrative forms etc.


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The level of IT use in the sector is very high with an indication that 84 percent of all

tour and travel firms own both the Internet and e-mail facilities 19. Ten percent own

only e-mail facilities and 6 percent only Internet facilities with 74 percent using the

Internet and 77 percent using e-mail heavily. Only 10 percent do not use the Internet

and only 3 percent do not use e-mail. This high level of ownership and usage

indicates some export preparedness among Ugandan tour and travel firms.

Although internet facilities are used for hotels, tour and travel agencies, the use of

e-commerce for export of cultural and wildlife tourism is limited. The internet offers

an ideal platform for unique products and unique marketing strategies. For example

video and sound recording systems and technologies can be used to capture

(record) traditional music and video documentaries for sale via Internet to culture

enthusiasts. The Uganda Wildlife Authority (UWA) can create virtual gorilla safaris

that can be sold to the Internet to encourage foreign tourists to come and visit

Ugandas eco-tourism sites.

E-Health (Tele-medicine)


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physicians provide tele-pathology services to hospitals in Bangladesh and Nepal.

Tele-diagnosis services are also provided by hospitals in Chinas coastal provinces

to patients in Macao, Taiwan, and some south-east Asian countries (UNCTAD

1997).

In Uganda, there is only one tele-medicine centre installed by International

Telecommunication Union (ITU) at Mulago Hospital. The facility is connected to only

two links: Mengo and Nakaseke leaving the rest of the country with no connectivity.

Acceleration of tele-medicine in Uganda would reduce on the number of patients

flying abroad for specialist care and provide the local communities with more

affordable specialist care.

E-Learning (E- education)

E-learning, is a field of education that focuses on the use of ICT technology and the

internet to effectively deliver education to students who are not physically "on site" to

receive their education. Instead, teachers and students may communicate

asynchronously (at times of their own choosing) by exchanging printed or electronic


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In many parts of the world, information technology holds promise for reaching

populations that could not be served by traditional education institutions. In Uganda

there are few institutions that have adequate financial resources to subscribe to

international electronic libraries. Neither do they have electronic libraries of their

own. While computing facilities are being developed, capacity is still at a relatively

low level. Locally developed study materials and curriculum remain limited and not

readily accessible electronically.

However given the massive demand for Uganda education in the east African

customs union and the COMESA region the provision of e-learning courses at major

universities and tertiary institutions could tap into a wealth of opportunities for the

export of Ugandas higher education.

ICT and E-commerce

Ugandas Networked Readiness Index (NRI)20 ranking has increased from 80 to 77 in

2004/2005 out of 104 countries, with a score of -0.63. This is an assessment of the


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finance in developing countries is driven by Internet banking, e-payments, and e-

trade finance. A narrow definition of e-finance is: financial services delivered online

through Internet fixed and wireless networks to enterprises and where appropriate,

the areas such as the offline use of electronic devices for payment transactions.21

The financial sector in Uganda has invested substantially in ICT applications, with

banks expanding their network connectivity including ATMs and satellite linkages. An

electronic payment system is still not in place to support authorization and clearance

of credit and debit card payments a significant inhibitor of e-commerce.

Creation of an E-Commerce Enabling Environment

The ability of Ugandan firms to realize the e-commerce potential will depend largely

on the creation of awareness of existing e-services export potential, proper

mainstreaming of services and e-commerce into national export strategies, proactive

cultivation of business opportunities linking various service sectors with the ICT

industry and the creation of the right enabling environment which is an immense


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E-awareness campaigns publicizing the benefits of e-commerce

Training and capacity building in IT and e-commerce both for businesses and

through the formal institutions of learning. Private and public services need to

be mobilized around basic IT training.

Marketing development and market identification skills for businesses.

Developing E-Commerce readiness (solutions) for small businesses.

National level

At the national level in promoting E-commerce, there must also be national policy

strategies that provide an enabling environment for the engagement of e-commerce.

These include:

ICT Infrastructure

Nationally, the government would have to put in place ICT infrastructure as well as

the administrative framework for its management. ICT development is the starting

point of the road to e-commerce success and the growth of e-commerce has been

linked closely with the development and diffusion of new information technologies


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alike. The absence of legal certainty has suppressed potential growth in e-business.

It will also be necessary to harmonize laws regionally and internationally and to

adopt best practices.

Efficient Transport and Delivery Systems

The strategies will also require national transport and delivery systems for a fast and

efficient air freight, express couriers, electronic customs clearance procedures,

warehousing and distribution systems that are e-commerce friendly.

Conducive Financial Services

The development of any meaningful eCommerce activities cannot occur in an

environment that does not enable customers to pay on-line. The financial sector

must also be developed to enable electronic financial transactions, financial systems

for E-payments, electronic banking and credit card access.


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electronic commerce is heavily dependant on several factors, but the most important

of them are the physical infrastructure (telecommunication network), financial and

legal framework, a business and trade environment conducive to e-commerce

regimes, and specific scheduled commitments that promote cross border trade in

services under the GATS. Preconditions for e-commerce development in Uganda

are illustrated in Figure 3.

Figure 3: Illustration of Preconditions for E- Commerce Development in

Uganda

Potential Trade Flow Exports & Imports

Trade in E-services

UGANDA

Wants to penetrate foreign

Country A through E-Commerce

Development of e-commerce

environmentADVANTAGES

Country A

Key Player in Electronicservices trade

Already Developed E-commerce


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CHAPTER FOUR

4.0 THE GENNERAL AGREEMENT ON TRADE IN SERVICES (GATS)

4.1 Definition of GATS

The General Agreement on Trade in Services (GATS) is a collection of legally

binding multilateral rules designed to regulate international trade in services and

gradually liberalise trade in services with a view to promoting the economic growth of

all trading partners. It was brought into force on 1st January 1995 after a process of


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the global and national economies. A group on negotiations for Services, separate

from the Group on Negotiations for Goods, was also established to carry out

discussions on services. The aim was to establish a multilateral framework that

would promote orderly and transparent trade and investment liberalization in

services (Chanda, 2002).

By the end of the Uruguay round in 1993 the member Governments had failed to

agree on a package of market opening commitments. Extended negotiations in 1995

resulted in an interim agreement. The outcome of these negotiations was the

General Agreement on Trade in Services (GATS) which came into force on January

1 1995 with a set of binding rules and disciplines to govern services trade. The

agreement is the first multilateral effort to establish rules governing trade in services

(including financial services) and to provide a framework for multilateral negotiations

(Andlug and Roy, 2005).

Because the very notion of including the services sector in a trade agreement was

so controversial, GATS is structured as a bottom up agreement applying only to


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and other cultural services; sporting and other recreational services; transport

services maritime transport services; internal waterways services transport; air

transport services; space transport; rail transport services; road transport services;

pipeline transport; services auxiliary to all Modes of transport; transport services not

included elsewhere23.

However, the W/120 (which is the official document used by members in making

schedules of specific commitments) divides the service sectors into twelve sub-

sectors. These are:

Business services

Communication services

Construction and related engineering services

Distribution services

Education services

Environmental services

Financial services

Health related and social services


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Mode 2: Consumption abroad, where a service is consumed in the territory

of one WTO member by a national of any other WTO member (e.g.

tourism)

Mode 3: Commercial presence, where a service supplier of one WTO member

crosses the border to establish and provide a service in the territory of

any other WTO member, i.e. establishment of a branch or wholly-

owned subsidiary (e.g. DHL, Standard Chartered Bank).

Mode 4: Movement of natural persons, where a service supplier of one WTO

member stays temporarily in the territory of another WTO member to

supply a service (e.g. Ugandan kyeyos).

The Modes of supply are illustrated in Table 3.

Table 3: The GATS Modes of Supply

Mode Supplier Presence Consumer Presence Example

Mode 1Cross-borderSupply

Service supplier notpresent within theterritory of theMember making the

Service consumer delivered toof the Member making thecommitment, from the territoryof another Member.

A Ugandan softwaredeveloper with aphysical presence inUganda works for a


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Of all these Modes of supply, the ones most relevant to e-commerce are Modes 1

and 2 because of the increasing number of services that can trade electronically

without having to establish a physical presence abroad. The GATS establishes

binding rules covering the treatment of foreign services and service suppliers and

government regulation of services. It includes two kinds of rules; Firstly, The

General Obligations (such as MFN, Transparency) and apply to all service sectors.

Secondly, The Specific Commitments (such as market access and national

treatment) on selected service sectors made by members through negotiations and

recorded in the national schedules and form an integral part of the GATS.24

The GATS' contribution to world services trade rests on two main pillars: (a) ensuring

increased transparency and predictability of relevant rules and regulations, and (b)promoting progressive liberalization through successive rounds of negotiations.

Within the framework of the Agreement, the latter concept is tantamount to improving

market access and extending national treatment to foreign services and service

suppliers across an increasing range of sectors. (Riddle 2003)


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A framework agreement which lays out the general rules and obligations for

trade and investment in services;

Sectoral annexes on specific service sectors (such as financial services, air

transport services, maritime transport services and telecommunications

services)

A schedule of specific commitments pledged by each WTO member and

Lists of exemptions granted to the members under the most favoured nation

(MFN) clause. Much as MFN treatment is a general obligation that applies to

all measures affecting trade in services, it was agreed that particular

measures inconsistent with the MFN obligation can be maintained in

principle for not more than ten years and subject to review after not more than

five years. Such measures must have been specified in a list of MFN

Exemptions submitted by the end of the Uruguay Round of Multilateral Trade

Negotiations or by the conclusion of extended negotiations on certain sectors

for which the delayed submission of related exceptions was expressly

authorized. Subsequently, requests for exemptions from Article II (MFN) can

only be granted under the waiver procedures of the Marrakech Agreement.


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Figure 2: Components of the GATS

GATS

Framework of RulesContains General Obligationsconducive to international

trade in services including:

Most Favoured Nation

Treatment

Transparency

Increasing participation

of developing countries

Economic integration

Domestic Regulation

Recognition

Monopolies & exclusive

National Schedules of

CommitmentsSubmitted by each of the 133

signatory countries. Schedulescontain commitments

regarding restrictions and

limitations to market accessand National Treatment.

Schedules typically comprise:

Cross-industry

commitments

Industry-specific

commitments withrespect to 4 modes of

Annexes and Ministerial

DecisionsProvide information regarding subsequent

negotiations to temporary MFNexemptions:

Annex on MFN exemptions

Annex on movement of naturalpersons supplying services under the

agreement

Annex on air transport services

Annex on financial services

Second Annex on financial services

Annex on negotiations on maritime


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4.6 Services Schedule of Specific Commitments under the GATS

Each WTO Member is required to have a Schedule of Specific Commitments which

identifies the services for which the Member guarantees market access and national

treatment and any limitations that may be attached. The Schedule may also be used

to assume additional commitments regarding, for example, the implementation of

specified standards or regulatory principles. Commitments are undertaken with

respect to each of the four different Modes of service supply. Member States list

specific commitments on service sectors and on activities within those sectors which

they are willing to liberalise. A specific commitment in a services schedule is an

undertaking to provide market access and national treatment for the service activity

in question on the terms and conditions specified in the schedule. These

commitments guarantee access to the countrys market in the listed sector, and they

spell out any limitations on market access and national treatment. In a service sector

where the member has not made any commitments or where a member expressly

limits access, GATS will not apply because the scope of those obligations depends

on the scope of the specific commitments made in the members Schedule. In

circumstances where a Member finds itself committed in sectors it had not


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subsidiary (Mode 3), but will not grant access to its construction market for individual

service providers who come in temporarily to carry out construction work (Mode 4).

Access to the market can also be limited 'horizontally', i.e. so that it applies to all

sectors.

b) Commitments on National Treatment

In addition to market access, most countries also generally grant national treatment

in the same sectors, i.e. treatment equal to that which is granted to their own

services or service providers. Here, too, specific limitations may be listed.

c) Commitments on Domestic Regulations

In those sectors where a country has made specific commitments, it will take steps

to ensure that all of the rules (laws, regulations, administrative decisions, etc.) are

administered in a reasonable, objective and impartial way. The provisions of GATS

on domestic regulations are simply procedural rules and do not govern the content of

rules. The GATS gives members the right to regulate services on their territory


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The ability of businesses providing services involved in electronic commerce

to establish themselves in foreign countries

The temporary entry into foreign countries of providers of services involved in

electronic commerce.

The value of such commitments is in providing and ensuring a secure and

predictable basis for international trade in these services. It is generally accepted

that the GATS Modes of supply of most relevance to the online delivery of services

via electronic networks are Mode 1 (cross-border supply of services without the

physical movement of the service supplier) and Mode 2 (consumption of services

abroad).

This means that the existing Mode 1 commitments listed on each WTO members

GATS schedules would apply to the delivery of services via the internet. This would

provide Foreign Service suppliers a transparent set of rules regarding the specific

level of market access and national treatment to which any given WTO member has

committed itself for the provision of Services. Therefore, a greater number of


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through an internet site accessible through payments, they can still access such

services wherever they are without having to travel to Uganda.

Since there are no limitations on market access through Mode 1 and 2, the provider

of the above services can provide their hotel services to Ugandan through the

internet or physically and tourists (service consumers) can freely come into Uganda

and enjoy the tourism industry. Since Uganda is currently focussed on marketing

herself abroad through Brand Uganda30 tourists can book through the internet for

the service long before they come to Uganda. There will definitely be cheaper costs

of international calling with the liberalization of the industry. For commercial

presence, a foreign service provider is granted access to the Ugandan market upon

government approval in accordance with the Investment Code Act Cap 92 Laws of

Uganda, and the regulations under it. Uganda is not bound under Mode 4 except for

technical personnel subject to the immigration laws. Uganda is bound to follow the

National Treatment principle for Mode 1, 2 and 3 and only technical personnel for

Mode 4.


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carried through networks of the duopoly major licence holders32 and other pre-

existing licence holders33, according to the terms of those licences.34 With the

current opening of cross border supply, Internet consumers in Uganda are expected

to enjoy lower prices.

Regarding market access, there is no limitation to the consumption abroad of those

services (Mode 2). This implies that any foreigner can use these services while in

Uganda without limitation. It also creates opportunities to attract foreign direct

investment (FDI) when there is infrastructure in the form of an efficient

communication sector. This mean that services like banking or architectural services

transmitted via telecommunications or mail from WTO Member country into Uganda

can only be allowed if they flow into the country without going through existing

license holders.

There is a limitation on Mode 3 (Commercial Presence), which means that a service

supplier from one WTO Member can establish territorial presence, say through

ownership or lease of premises, in Uganda to provide a service (e.g. domestic


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and temporary stay of Foreign service suppliers is subject to compliance with laws,

regulations and guidelines in force in Uganda37. This means that a foreign company

or service provider is not allowed to bring its staff to work for it in Uganda unless they

are technical staff and no Ugandans are available or can become available to give

that service.

Regarding national treatment commitments, there is no limitation for Mode 1, 2 and

3. This implies that Uganda is not allowed to operate discriminatory measures

benefiting domestic services or service suppliers as compared to the treatment it

gives to foreign service providers. Uganda is expected not to modify, in law or in fact,

the conditions of competition in favour of her domestic or own service industry. For

Mode 4 (movement of natural persons), it is not bound to treat them like Ugandans

except for the technical personnel stipulated under market access.

Another sector in which Uganda has made commitment is the mobile cellular voice

and data38. For crossborder supply of mobile cellular voice and data, roaming is

allowed but cross-border access permitted only via network of duopoly major licence

operators.39 There is no market access limitation on consumption abroad of the


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For Data services TCP/IP (Internet)41, market access is available for cross-border

supply now since the limitation of international voice over Internet, not permitted

during the five-year exclusivity period of the duopoly major licence holders has

ended. There is no limitation on consumption abroad and commercial presence;

only that the latter requires companies to be registered in Uganda. Market access

limitation on Mode 4 is the same as for the above sub-sectors. Uganda is bound

under national treatment for Modes 1, 2 &3. National treatment limitations are inrespect of technical personnel as far as Mode 4 is concerned.

Global mobile personal communications by satellite operations services are also

listed under the Communications sector. Market access for cross-border supply is

only permitted only under agreement with one or both of the duopoly operators as

well asarrangements under GMPCS-MoU42, to which Uganda is a signatory. Under

the MoU, signatories have an arrangement of cooperation through the sharing of

information. Modes 2, 3, and 4 are similar as for internet service providers. There

are no national treatment limitations except for Mode 4 under which limitations exist

(other than for technical personnel).


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result in innovative communications technology being transferred into the country by

all sorts of IT investors. There is no limitation in respect to Mode 3 and Mode 2. This

means that it is simple for local ICT companies to now manage their own VSAT

(Very Small Aperture Terminal) links where they can transmit data directly.45 It also

means that a service provider can come in Uganda and establish a paging service

business without hindrance if all domestic investment regulations are followed. In

respect to National Treatment, there is no limitation for Mode 1, 2 & 3 and Uganda is

not bound on Mode 4. Foreign suppliers can provide paging services without going

through the major duopoly licence holders.

International basic voice telephony traffic, except cross-border access alternative for

is allowed but cross-border access for roaming and paging services must be carried

out through the networks of the duopoly major licence holders and other pre-existinglicence holders, according to the terms of those licences. Global mobile, personal

communications by satellite operations are permitted only with agreement with one

or more duopoly operators as well as arrangements under GMPCS-MoU, to which

Uganda is a signatory. Similarly Data services TCP/IP (Internet) were scheduled as


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including: engaging in anti-competitive cross-subsidization; using information

obtained from competitors with anti-competitive results; and not making available to

other services suppliers

Documents

Uptop Gats Mbabazi Final Report 191206